A state funding drought that JPS endured last year will present an even tougher challenge for the health network this year, officials said.

Last year, the network anticipated the restoration of more than $8 million in state and federal funding, but that money failed to materialize. John Peter Smith Hospital staff overcame the funding loss by working more efficiently, officials said.

Now, the Texas Health and Human Services Commission has unveiled a complex proposal, dependent on the approval of the federal government, to restore funding to health care providers statewide. On Tuesday, a meeting between Commissioner Albert Hawkins and health and human services subcommittee members of the Texas House received mixed reviews.

The commission's plan calls for money earmarked for hospitals to be used in several ways that will address funding shortfalls. Lawmakers and health care administrators have expressed reservations about whether the plan calls for federal dollars to be used to draw down more federal dollars, which may not meet with the approval of officials at the Center for Medicare and Medicaid Services.

But the plan could also undo many of last year's health care cuts if it works. If it is unsuccessful, the cost to the JPS Health Network may be more than $10 million.

David Cecero, the health network's chief executive officer, said he expects that the money JPS needs from the state will be swallowed up by a $600 million funding shortfall in Medicaid and the Children's Health Insurance Program caused by bad budgeting at the state policy-making level.

"That money is being taken away from us and being used for purposes for which it was not meant," Cecero said.

That $10 million would not affect operations or services, but it could affect expansion plans, Cecero said. JPS officials are eyeing part of a $120 million package earmarked for distribution to the 167 hospitals that care for most of the state's Medicaid patients.

Had state officials acted to undo this past year's cuts in health and human services before a deadline Wednesday, health care providers could have received an additional $2.1 million. But because an enhanced federal matching program ended that day, Texas hospitals will not get that money, either.

Along with the money not being used to undo cuts in health care programs, the state is forgoing more than $100 million in federal aid by not acting sooner, Cecero said.

"We are watching the sun set on an opportunity," Cecero said.

Hospital administrators are "mad and I don't blame them," said state Rep. Garnet Coleman, D-Houston. "They are getting hit twice. By cutting all the coverage, you pass the problem down to the county level. And then they get less money than they expected and their costs are rising because of policies made by the state."

The crisis was caused by the state's inability to deal with budget realities in 2003, JPS officials said.

Medicaid case projections were cut by 100,000 in order to balance the state budget, even though state lawmakers should have known those numbers were actually going to be higher, said Tom Roy, JPS Health Network vice president.

"It was basically deficit spending," Roy said. "They were just saying, 'Well, we're not going to have that many,' even though they knew that they were."

At the time, lawmakers were struggling with a $10 billion budget deficit and were not pleased with the available options, said Rep. Vicki Truitt, R-Keller.

More money was needed for education funding, and there was more than one Medicaid caseload projection. The most conservative projection was not chosen, Truitt said.

"But I'm not sure we did the wrong thing," Truitt said. "The economy is better now, and hopefully we can work ourselves out of this situation."